ABSTRACT
This chapter explains the naivete of Sir James Steuart’s theory of money and credit. The Steuart doctrine’s naivete on money and credit lies in its lack of insight into revolutionary changes prompted by the Consols; their market role in creating an environment where every money holder could earn interest at will; and their interest rates’ role in providing ready money for answering occasional demands. Steuart’s naivete is evident in his critique of de Montesquieu-David Hume’s quantity theory of money. The scepticism of Hume provides a frame of reference for comparing Steuart and John Maynard Keynes on the nature of liquidity and the use of money. Hume’s scepticism – which awakened the works of Immanuel Kant and Karl Popper – was summarized by Keynes’s Cambridge senior Bertrand Russell as the proposition that ‘nothing can be known a priori about the connection about cause and effect’.
